USD/MXN under 20.00, at six-week lows before Banxico

Fresh US data shows a slowdown in inflation.
Banxico is expected to hike rates by 75 basis points on Thursday.
USD/MXN falls for the fourth consecutive day.

Matías Salord FXStreet

The USD/MXN printed a fresh monthly low on Thursday at 19.90. It remains near the bottom, under pressure ahead of Banxico’s decision and amid a weaker US dollar.

Economic data in the US showed inflation slowed down in July. The Consumer Price Index remained unchanged while the Produce Price Index dropped by 0.5%, according to data released on Thursday.

The decline in inflation eased expectations about further aggressive tightening from the Federal Reserve. Still, market participants see a 50 basis points rate hike at the next meeting in September.

The US dollar remains under pressure. The greenback tumbled on Wednesday and so far on Thursday retains those losses, unable to recover ground on a sustained basis, even as US yields soar. The US 10-year yield climbed from 2.75% to 2.84%, the 2-year rose to 3.20% and the 30-year to 3.11%.

Emerging market currencies, in general are rising against the US dollar, supported also by the improvement in risk sentiment. The Dow Jones is up by 0.47% and the S&P by 0.37%, adding to Wednesday’s strong gains.

The Bank of Mexico will announce its decision in a few hours. The central bank is expected to raise the key rate from 7.75% to 8.50% as inflation shows no signs of a slowdown. The CPI rose in July by 8.15%, the highest annual rate since December 2002, well above Banxico’s 2-4% target. “The swaps market is pricing in 175 bp of further tightening over the next 6 months that would see the policy rate peak near 9.50% but we see some upside risks,” said analysts at Brown Brothers Harriman.

Technical levels

USD/MXN

Overview
Today last price	19.9365
Today Daily Change	-0.0933
Today Daily Change %	-0.47
Today daily open	20.0298

Trends
Daily SMA20	20.4459
Daily SMA50	20.2828
Daily SMA100	20.1597
Daily SMA200	20.4296

Levels
Previous Daily High	20.2789
Previous Daily Low	19.9135
Previous Weekly High	20.8348
Previous Weekly Low	20.2392
Previous Monthly High	21.0539
Previous Monthly Low	20.0921
Daily Fibonacci 38.2%	20.0531
Daily Fibonacci 61.8%	20.1393
Daily Pivot Point S1	19.8692
Daily Pivot Point S2	19.7087
Daily Pivot Point S3	19.5039
Daily Pivot Point R1	20.2346
Daily Pivot Point R2	20.4394
Daily Pivot Point R3	20.6

Author

Matías Salord

FXStreet

Matías started in financial markets in 2008, after graduating in Economics. He was trained in chart analysis and then became an educator. He also studied Journalism. He started writing analyses for specialized websites before joining FXStreet.

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